An Overview of Classifying Earnings and Profits Reported on Form 5471 Schedule J Before and After 2017 International Tax Reform
By Anthony DiosdiGenerally, U.S. shareholders of a controlled foreign corporation or CFC are required to include in their U.S. income: 1) their pro rata share of subpart F income under Internal Revenue Code Section 951(a) (such as passive income and certain foreign sales and service income); 2) their pro rata share of CFC’s earnings from investments in U.S. property as defined in Internal Revenue Code Section 956; and 3) after the enactment of the 2017 Tax Cuts and Jobs Act, other items of global intangible low-taxed income (“GILTI”) as defined in Internal Revenue Code Section 951A. The U.S. shareholder is taxed even if the CFC does not make an actual distribution to the shareholder. To avoid double taxation, Internal Revenue Code Section 959 provides that previously taxed earnings and…